Hermes Says Sales Growth May Top 10 Percent Goal This Year

Hermes International SCA (RMS), the French maker of Kelly bags, said sales growth this year may top 10 percent after reporting revenue that surpassed analysts’ estimates in the second quarter.

Sales climbed 12 percent to 910.4 million euros ($1.2 billion), the Paris-based company said today in a statement. Analysts predicted 897.4 million euros, according to the average of five estimates compiled by Bloomberg. Sales excluding currency swings rose 16 percent, topping estimates for 13.5 percent growth.

“Management tends to be conservative with forward looking statements, so you can usually add some to the outlook,” said Rey Wium, an analyst at Renaissance Capital in Johannesburg. While the earnings were “overall better than expected,” revenue growth of just 3 percent for watches reflects on the general Swiss watch market, he said.

Leather-goods sales advanced 12 percent, accelerating from the first-quarter’s 7.3 percent gain, as Hermes was better equipped to serve Asian demand for its Birkin and other handbags after opening two new workshops last year. The company expects production capacity to increase steadily throughout 2013.

“Demand for Hermes items remains strong,” Hermes said in the statement. “In light of the sales achieved in the first half of the year, consolidated sales at constant rates could slightly exceed the mid-term growth target of 10 percent.”

Photographer: Tomohiro Ohsumi/Bloomberg

A pedestrian walks past an Hermes store, operated by Hermes International SCA, in Beijing. The company's revenue excluding currency shifts advanced 16 percent in Asia, 15 percent in Europe and 22 percent in the Americas. Close

A pedestrian walks past an Hermes store, operated by Hermes International SCA, in... Read More

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Photographer: Tomohiro Ohsumi/Bloomberg

A pedestrian walks past an Hermes store, operated by Hermes International SCA, in Beijing. The company's revenue excluding currency shifts advanced 16 percent in Asia, 15 percent in Europe and 22 percent in the Americas.

Currency Swings

The shares rose 2.4 percent to 257.15 euros at 9:30 a.m. in Paris, giving the company a market value of 27.2 billion euros. A close at this price would be the biggest gain since June 25.

Revenue excluding currency shifts advanced 16 percent in Asia, 15 percent in Europe and 22 percent in the Americas. In Japan, where Hermes gets about 16 percent of revenue, sales advanced 8.9 percent, the company said.

Revenue from clothing and fashion accessories rose 23 percent, while silk and textiles had a 10 percent gain and perfume sales rose 22 percent. Tableware sales increased 12 percent, Hermes said.

Global luxury sales will rise 4 percent to 5 percent this year, excluding currency shifts, Bain & Co. estimates. Growth will be sustained as booming demand in southeast Asia offsets a slowdown in China and Europe, according to the consultant.

LVMH Moet Hennessy Louis Vuitton SA, (MC) the world’s largest luxury-goods maker, owns about 22.6 percent of Hermes. LVMH was fined 8 million euros this month for breaching disclosure rules when it built its stake in the company.

Hermes said in March that profitability may slip this year as the Japanese yen weakens against the euro. Last year, a declining euro helped boost operating profit as a percentage of sales to a record 32.1 percent, CEO Patrick Thomas said at the time. Earnings should rise this year, he said then. Hermes makes the majority of its products in Europe.

To contact the reporters on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net; Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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